WiseBanyan review: Automated saving

This editorial content is not provided or commissioned by any of the referenced financial institutions or companies. Opinions, analysis, reviews or recommendations expressed here are the author’s alone, not those of any financial institutions or companies, and have not been reviewed, approved or otherwise endorsed by any such entity. All products or services are presented without warranty.

If your goal is to stop procrastinating and start saving, WiseBanyan offers a solution.

WiseBanyan, a robo-adviser offering free financial management, will pick out investment funds based on your personal financial situation, buy them for you and manage your portfolio.

What is WiseBanyan?

WiseBanyan is a free robo-adviser service registered with the Securities and Exchange Commission.

Other robo-advisers, such as Betterment and Wealthfront, make money by charging clients a fee based on a percentage of the assets they manage. That’s typically 0.25% to 1.0% annually or $25 to $100 a year to manage $10,000.

Investing fees, of course, eat into your returns, so the lower, the better.

WiseBanyan also has no trading or custodial fees. It doesn’t share your personal information or show you ads, either, unlike some financial service providers that earn money that way.

Instead, WiseBanyan uses a so-called “freemium” model. The basic service is free, and you can pay extra for the only service WiseBanyan charges for: WiseHarvesting, “an investment strategy designed to offset your income taxes” that is only available for taxable accounts, not retirement accounts.

You can open an individual (non-retirement) investment account, a Roth IRA or a traditional IRA. Or if you’re a business owner, SEP IRAs are available.

How WiseBanyan invests your money

ETFs let you own numerous securities, such as all the stocks in the S&P 500, in a single investment.

Instead of having to save up thousands of dollars to buy one share of every top company in the United States, you can buy one share of an S&P 500 ETF for $200 and own a tiny piece of all those companies. And since WiseBanyan lets you buy fractional shares, you don’t even need $200 — you can get started with as little as $1.

All the ETFs used by WiseBanyan are passively managed, which means they are designed to earn the same returns as the index they track without an investment adviser constantly tinkering with the fund. Active management tends to cost more and perform worse.

The average expense ratio for the portfolio of ETFs that Wisebanyan will buy for you is just 0.12%, compared with an average of 0.44% for the market as a whole.

No matter where you invest, you’ll pay these expense ratios, which are the fees a brokerage like Fidelity or Vanguard charge to manage the fund.

A WiseBanyan portfolio gives you exposure to a wide variety of assets: U.S. stocks, foreign developed and emerging-market stocks (Japan is an example of a developed market; China is an example of an emerging one), intermediate- and short-term U.S. government bonds, U.S. corporate bonds, Treasury Inflation-Protected Securities (TIPS) and real estate investment trusts (REITs).

In short, WiseBanyan will set you up with a well-diversified portfolio, which is what many financial advisers recommend for retirement savings.

Most ETFs at WiseBanyan come from Vanguard, a well-respected brokerage that has been around since 1975 and has an excellent reputation for low-cost funds. WiseBanyan says it does not receive commissions, kickbacks or revenue sharing from the companies whose funds it recommends, so it can provide unbiased investment advice.

How to open a WiseBanyan account

Opening an account takes about 10 minutes. To get started, enter your email address in the sign-up box on WiseBanyan’s home page. You’ll receive a link within a few minutes that will allow you to open an account.

You’ll need to answer a few questions to help WiseBanyan decide what percentage of your portfolio to allocate to stocks versus bonds based on your risk tolerance.

The service is based on savings goals called milestones: build wealth, rainy day, retirement or custom.

Choose “retirement,” for example, and the site will ask how much you want to spend per year when you retire and at what age you want to stop working. You can use the site’s recommended targets or enter your own. The site automatically calculates for inflation.

After funding your first milestone through your linked bank account, you can create others and transfer funds from 1 milestone to another if your goals change.

WiseBanyan will tell you how much to deposit each month to reach your retirement goal based on your income level, net worth and time horizon. Automatic deposits are optional but are recommended to keep you on track and to dollar-cost average your investments.

Your account balance of up to $500,000 is covered by SIPC insurance, which protects you if the brokerage goes bankrupt but not against investment losses.

Who WiseBanyan is best for

WiseBanyan is an excellent service for anyone who doesn’t have the time, knowledge or desire to handle their own retirement calculations, choose their own investments and manage their own portfolio.

It’s also a logical option for anyone who doesn’t have the means or the desire to hire a financial adviser to manage their money. Beginner investors with little investment experience and knowledgeable investors who want to save time can both benefit from this service.

And since there’s no minimum investment requirement, WiseBanyan is a good choice for people who don’t have much to set aside but would like to start saving.

Where WiseBanyan is lacking

People who want more control over their investments won’t appreciate WiseBanyan’s hands-off approach. It’s not the right service for those who want to purchase individual stocks or bonds, like to trade frequently or don’t want to invest in the asset classes that a WiseBanyan portfolio automatically includes.

It also doesn’t offer personalized recommendations or the ability to sit down and talk to a real person.

WiseBanyan also doesn’t offer custodial or joint accounts, so you won’t be able to establish an account for a child or grandchild — or share an account with your spouse. Roth IRA conversions or recharacterizations aren’t available either (though it does allow rollovers and transfers).

Finally, WiseBanyan launched in 2014 and hasn’t yet stood the test of time. If this relatively new service goes out of business, you’ll have to transfer your account elsewhere. Of course, you’ll take the same risk with any other robo-adviser.

The bottom line

While WiseBanyan currently offers limited account types, it excels in offering an automated, low-cost way to save and invest for retirement and other goals.

A sound portfolio of low-cost ETFs and excellent guidance gives investors a way to easily save without committing to a certain initial or ongoing investment.

And while the company is relatively new, any money you stash there (up to half a million dollars) is insured should WiseBanyan ever go bankrupt.

This editorial content is not provided or commissioned by any of the referenced financial institutions or companies. Opinions, analysis, reviews or recommendations expressed here are the author’s alone, not those of any financial institutions or companies, and have not been reviewed, approved or otherwise endorsed by any such entity. All products or services are presented without warranty.

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